Re European Lithium Limited [No 2] [2026] WASC 458: Scheme Approved

• The Supreme Court of Western Australia approved Critical Metals' acquisition of European Lithium Limited via two schemes of arrangement on October 26, 2026.
• An independent expert deemed the share scheme "reasonable but not fair," while the option scheme was "fair and reasonable."
• European Lithium securityholders overwhelmingly approved the schemes, with 99.96% of votes cast for the share scheme.
• The court found no evidence of improper purpose or minority oppression and noted ASIC had no objection.
• Both companies intend to use the court's approval to claim an exemption from US share registration requirements.

The court's careful consideration of governance, including the independent board committee, and the strong shareholder endorsement, despite the independent expert's 'not fair' scheme opinion, provides a robust framework for understanding judicial oversight in complex corporate restructurings.

The Supreme Court of Western Australia has granted final approval for Critical Metals' acquisition of European Lithium Limited, a transaction structured through two interconnected schemes of arrangement. The decision, handed down on 26 October 2026 in Re European Lithium Limited [No 2] [2026] WASC 458, paves the way for Critical Metals to acquire all shares and listed options of European Lithium. This follows an initial hearing in September 2026 where the court had permitted the schemes to proceed to a securityholder vote.

Under the terms of the arrangement, most European Lithium securityholders will receive 0.045 new Critical Metals shares for each European Lithium share, rather than a cash payment. Upon completion, European Lithium is set to delist from the stock exchange and become a wholly owned subsidiary of Critical Metals. This consolidation will grant Critical Metals full ownership of a Greenland rare earth project, which the court identified as a core component of the company's overall value proposition. Given that both Critical Metals and European Lithium shared directors, raising potential conflict of interest concerns, the court noted that the ongoing recommendation from an independent board committee and an independent director provided significant reassurance regarding the fairness and reasonableness of the proposals.

A notable aspect of the WA Supreme Court scheme of arrangement approval was the independent expert's assessment of the proposals. While the scheme concerning European Lithium's listed options was deemed "fair and reasonable," the share scheme received an opinion of "reasonable but not fair." Despite this nuanced finding, the expert ultimately concluded that the transaction served the best interests of securityholders, particularly in the absence of any superior alternative proposals, none of which materialized. The court, in its deliberation, acknowledged this distinction, finding the schemes to be fair and reasonable "in the sense the expert explained."

Securityholders demonstrated overwhelming support for the acquisition during separate meetings held on 22 October 2026. The share scheme garnered an impressive 99.96 percent of votes cast and the backing of 97.22 percent of shareholders present and voting. Optionholders present and voting unanimously approved their respective scheme. The court emphasized that while statutory majorities are crucial, they do not automatically compel approval. However, it also recognized that securityholders are often best positioned to assess their own commercial interests. Crucially, the court found no evidence of improper purpose or minority oppression, and it accepted that all disclosures made to securityholders were full and fair. The Australian Securities and Investments Commission (ASIC) also confirmed it had no objection to the scheme's approval, further reinforcing the regulatory green light for this related party transaction court approval Australia. Minor procedural discrepancies were dismissed by the court as immaterial, characterized as "the usual bumps and scrapes" of such processes.

The court's decision in Re European Lithium Limited [No 2] [2026] WASC 458 carries significant implications beyond the immediate acquisition, particularly concerning cross-border regulatory compliance. Both Critical Metals and European Lithium informed the court of their intention to leverage the Australian court's approval to claim an exemption from US registration requirements for the new Critical Metals shares to be issued. This highlights a potential pathway for companies involved in similar transactions to streamline their international regulatory obligations.

While the Supreme Court of Western Australia did not make a definitive ruling on whether the US exemption would apply under US law, it meticulously documented the specific factors upon which the companies intended to rely. These factors included the public nature of the court hearing and the absence of any opposition from securityholders to the schemes. This aspect of the judgment underscores the potential for Australian court approval to serve as a foundational element for satisfying foreign regulatory frameworks, offering a valuable precedent for future Critical Metals European Lithium acquisition type deals involving international share issuance. The court's careful consideration of governance, including the independent board committee, and the strong shareholder endorsement, despite the independent expert's 'not fair' scheme opinion, provides a robust framework for understanding judicial oversight in complex corporate restructurings.

Lawyers advising on Australian schemes of arrangement, particularly those involving related parties or where an independent expert deems a proposal 'not fair' but 'reasonable', should note the court's emphasis on strong shareholder approval, the role of independent board committees, and the absence of minority oppression. This case also highlights the potential for Australian court approval to be relied upon for US registration exemptions for new shares issued in such transactions.

Source: Original reporting via Australasian Lawyer